We use a simple model of a closed economy to study the recommendations of monetary policy-makers attempting to respond optimally to an asset-price bubble whose stochastic properties they understand. We focus on the impact which the zero lower bound (ZLB) on nominal interest rates has on the...

Since the late 1990s there have been substantial changes in the current account balances of a number of economies, most notably a marked widening in the current account deficit of the United States and increased net lending by many developing nations to developed economies. This paper uses panel...

Policy-makers have recently noted an apparent flattening of the Phillips curve. The implications of such a change include that a positive output gap would be less inflationary, but the cost of reducing inflation, once established, would increase. This paper’s objective is to review the...

In the wake of the global financial crisis a considerable amount of research has focused on integrating financial factors into macroeconomic models. Two common approaches for doing so include the financial accelerator and collateralised lending, examples of which are Gilchrist, Ortiz and...

This paper characterizes UK public spending pressures over a ten-year horizon and their implications for public deficits and debt levels. The analysis is based on a ‘bottom-up’ scenario for total public expenditure, that includes, inter alia, implementation of the NHS Long-Term Workforce...

This note provides guidance on how to calibrate fiscal rules; that is, how to determine the thresholds (ceiling, floor, or target) for specific fiscal aggregates constrained by rules. The note focuses, more specifically, on the calibration of the debt, balance, and expenditure rules.